U.S. extends comment period on Keystone XL through the end of May

WASHINGTON (Reuters) – The U.S. State Department announced on Friday it is extending the government comment period on the Keystone XL pipeline, a move that likely postpones a final decision on the controversial project until after the November 4 mid-term elections.

President Barack Obama has said he will make a final decision on whether to allow the pipeline connecting Canada’s oil sands region to Texas refiners and several government agencies had been given until the end of May to weigh in. This had raised expectations of a final decision by mid-year.

However on Friday officials cited uncertainty stemming from a dispute in Nebraska over the proposed route of the pipeline as reason to keep the federal agency comment period open longer, throwing into doubt the timing of a project that has been awaiting a U.S. permit for more than five years.

“The Permit process will conclude once factors that have a significant impact on determining the national interest of the proposed project have been evaluated and appropriately reflected in the decision documents,” the State Department said.

The move is likely to infuriate Canadian politicians who have grown increasingly irate over delays. It may also upset some in Obama’s own party. Just a week ago, 11 Democratic senators, many facing tough November races, urged him to make to make a decision by May 31.

The move will also have sweeping consequences across Canada’s oil industry, threatening to prolong the deep discounts on cash crude prices for producers such as Suncor Energy Inc and Cenovus Energy Inc, while aiding oil-by-rail developers like Gibson Energy and Canexus Corp that are racing to fill a gap left by a lack of export pipeline capacity.

By linking Canadian fields to refiners in the Gulf Coast, the 1,200-mile (1,900-km) Keystone XL pipeline would be a boon to an energy patch where oil sands are abundant but that produce more carbon pollution than many other forms of crude.

Keystone opponents say that burning fossil fuels to wrench oil sands crude from the ground will worsen climate change, and that the $5.4 billion pipeline, which could carry up to 830,000 barrels a day, would only spur more production.

State Department officials briefed lawmakers on Friday afternoon.

The uncertainty in Nebraska arose in February after Judge Stephanie Stacy struck down a state law that had allowed Governor Dave Heineman to approve the pipeline’s path through the state. Some landowners had objected to the legislation, saying it disregarded their property rights.